The re-emergence of Federalism as a political issue?

Dugald Monro, University of Sydney

In the 2001 Federal Election ‘Great Debate’ John Howard argued that the Goods and Services Tax (GST) was the best thing that any one had done for education in Australia in recent years. Labor Party advertisements had fun with this during the election campaign. However the issue is not one of education policy, or even taxation policy, but of federalism. Let us suppose that the GST does, in time, provide the states with all the funds they could possibly use for education and health. Let us also suppose that one (or more) state does very little, or refuses to provide for one section of society. Are we to imagine that the Commonwealth would sit back and do nothing? That the federal opposition would not seek political gain out of the issue? In areas such as education and health, is the federal government’s only proper role that of provider of funds through the GST?

Federal-state relations have periodically been contested in Australian politics. Labor Prime Minister Whitlam’s centralist ‘new federalism’ attempted to extend Commonwealth influence to new areas. By contrast, conservative Prime Minister Fraser’s new federalism emphasised ‘state rights’ (Gillespie 1994). In the last decade or so, much discussion focussed on the Hawke and Keating governments’ new federalism, which began with the Special Premiers’ Conference called by Prime Minister Hawke in 1990. The primary aim at this conference was to pursue ‘micro-economic reform’ through cooperation between the Commonwealth and the states (Painter 1998). However federal-state financial relations were a major concern for the states, being described by then state premiers John Bannon and Wayne Goss as the ‘core’ or ‘fundamental’ question (Bannon 1992, Goss 1995). The Hawke and Keating governments’ approach did not resolve this issue. John Howard’s government saw the answer to the question of federal-state financial relations as the introduction of the GST, with Peter Costello claiming that ‘This (the GST) is the major reform of Commonwealth-state financial relations in the history of Federation’ (1999).

Costello claims the GST as ‘the major reform of Commonwealth-state financial relations in the history of Federation’.

Significantly, the 2001 election ‘Great Debate’ may point to a future of less federal involvement in some areas, provided the states’ revenue base is regarded as sufficient. Howard stressed that the Commonwealth’s role in areas such as education and health was to ensure that the states had sufficient funds: ‘So yes I am in favour of doing more for education… But the way you do it is to give to the states of Australia a sound revenue base’ (The Great Debate 2001). The same approach could be applied to other areas such as housing and disability services. It could also be used, as revenue from the GST increases, to justify cutbacks in Commonwealth specific purpose payments to the states as well as to justify maintaining funding at current levels.

Opposition leader Kim Beazley disputed that the GST gave the states a sufficient revenue base for education and health:

As the Prime Minister knows it is years before the GST actually catches up to the funding arrangements that were put in place from a whole complex of sources to states to do the sorts of things about schools and hospitals that they wish to do… commentators out there [are] saying… If the Commonwealth government isn’t going to be in there with its revenue base and the things it can do for schools you are going to have to talk about raising the rate of the GST or putting it on to food’ (The Great Debate 2001)

But the adequacy of funding to the states is not the only political issue likely to arise as a result of the Prime Minister’s position. The view that the Commonwealth’s responsibility in areas such as health and education is purely to ensure that the states have a sufficient revenue base is close to what is described in the federalism literature as ‘coordinate federalism’. On this view, policy areas should be allocated to one or other level of government and not shared between them (for example, see Wheare 1964).

Yet the Australian federation does not work this way (Gerritsen 1997). John Howard knows this: he has not been slow to act in areas of traditional state responsibility where he sees this as desirable. Consider his actions after the Port Arthur massacre. He justified federal intervention on the grounds of the overall national interest:

The Commonwealth judges it to be in the national interest to offer assistance on such a scale to the states and territories, notwithstanding that gun control falls largely within their responsibilities. National leadership needs to be exercised so that the problem of the proliferation of these guns is confronted swiftly and adequately (Howard 1996).

Although the Commonwealth provided funds to the states for the gun buy-back, the Commonwealth was concerned to achieve specific state actions on gun laws as well as providing them with adequate funding. By making funding dependent on the states passing specific provisions relating to gun control, the Commonwealth was specifying how the states should exercise a power given to them by the Commonwealth as well as giving them funds to exercise this power.

Prime Minister Howard justified intervention in gun law reform as in the national interest.

During the 2001 ‘Great Debate’ Beazley hinted that the Commonwealth might also need to specify how the states exercised their education and health powers when he commented:

One of the things my father said and I profoundly believe is that as Prime Minister of this nation I am responsible for every kid in this country where ever they come from to ensure that they get what they need in education, health or whatever (The Great Debate 2001).

Here Beazley suggests that if a state had sufficient funds, but did not provide adequate education or health for some children, the Commonwealth should intervene. Are such circumstances likely to arise? The scenario of state neglect of a field of need, or of particular groups of needy people that I outlined earlier is not entirely fanciful. There are precedents: Queensland, for example, provided no public housing for pensioners prior to the Commonwealth’s State Grants (Dwellings for Pensioners) Act of 1969, although all other states made some provision (Jones 1972). Similarly, Commonwealth direct provision of rehabilitation services has been described as taking place as a result of the lack of state action in the area (Le Sueur 1977).

Circumstances short of total neglect might also be seen as justifying Commonwealth involvement in areas given by the Constitution to the states. The Australian Nation principle discussed at one of the early Special Premiers’ Conferences was an attempt to indicate when Commonwealth intervention was justified. This principle did not confine the Commonwealth’s responsibility to ensuring that states’ revenue was adequate. Circumstances where Commonwealth intervention could be justified included:

  • issues, such of the condition of aboriginal people, considered of national importance, with implications for Australia’s international reputation
  • where Australia is a signatory to international conventions
  • that Australia should aim for unity rather than diversity in social programs (Healy and Robbins 1996).

Governments’ advocacy of these reasons for Commonwealth intervention in the early 1990s suggests that similar reasons may be advanced in the future. Aiming for unity rather than diversity in social programs could lead to Commonwealth involvement in areas such as health and education in a large range of circumstances. The level of states’ funding for public education, support for specific health areas such as women’s health, and the nature and style of public housing have been issues at the federal level in the past. Should one or more states be seen as neglecting issues such as these, pressure for Commonwealth intervention seems likely, whether or not GST revenues seem sufficient for the states to meet needs in these areas. The Commonwealth might offer additional funds to the states tied to the states’ undertaking specific actions, might introduce new, separate Commonwealth programs, or might attempt to direct how the states use their GST funds by requiring minimum levels of expenditure for certain activities.

Federalism debates in the future are likely to involve not just Commonwealth-state financial relations but also the right of the Commonwealth to intervene in areas left by the Constitution to the states. We may find ourselves revisiting the centralist versus states’ rights controversies of the Whitlam and Fraser eras.

REFERENCES

Bannon, J. (1992) Cooperative Federalism Good Policy and Good Government, Federalism Research Centre, Australian National University, Canberra.

Costello, P. (1999) House of Representatives Debates, H of R 225, Parliament of Australia, Canberra, pp. 4178–4181.

Gerritsen, R. (1997) ‘Some progress was made: intergovernmental relations in the second Keating Government’, in The Second Keating Government, G. Singleton (ed.), Centre for Research in Public Sector Management, University of Canberra, Institute of Public Administration Australia, Canberra, pp. 124–142.

Gillespie, J. (1994) ‘New Federalisms’, in Developments in Australian Politics, J. Brett, G. James, and M. Goot, (eds.), MacMillan Education, South Melbourne.

Goss, W. (1995) Restoring the Balance, the Future of the Australian Federation, Federalism Research Centre, Australian National University, Canberra.

Healy, J. and Robbins, J. (1996) ‘Community Services’, in South Australia, Federalism and Public Policy, A. Parkin (ed.) Federalism Research Centre, Australian National University, Canberra, pp. 273–290.

Howard, J. (1996) House of Representatives Debates, H of R 207, Parliament of Australia, Canberra, pp. 1673–1674.

Jones, M. A. (1972) Housing and Poverty in Australia, Melbourne University Press, Melbourne.

Le Sueur, E. J. (1977) The Australian Government Rehabilitation Service, Commission of Inquiry into Poverty, Canberra.

Painter, M. (1998) Collaborative Federalism. Economic Reform in Australia in the 1990s, Cambridge University Press,Cambridge.

The Great Debate (2001) Transcript of the Prime Minister, The Hon. John Howard MP and the Leader of the Opposition, The Hon. Kim Beazley MP, Channel 9, 14 October 2001, available online at: http://www.abc.net.au/public/misc/great_debate_141001.doc [accessed 15/11/2001].

Wheare, K. C. (1964) Federal Government, 4th edition, Oxford University Press, Oxford.

Dugald Monro is a Ph.D. Candidate in Government and International Relations at the University of Sydney. Prior to commencing his Ph.D. he was a Commonwealth public servant and for many years worked in the area responsible for funding the states for public housing.